What are the typical terms and conditions of a business term loan?

A business term loan comes with certain standard terms and conditions set by the lending institutions. Some of the key terms are:

• Loan amount and tenure: Term loans often range from a few lakhs to a few crores, with tenures typically between 1 and 5 years. Some loan providers may also offer higher loan amounts and longer repayment periods.
• Interest rates and processing fees: Interest rates vary based on the borrower's profile and creditworthiness. Financial institutions may charge a one-time processing fee as well.
• Repayment: Repayment is through Equated Monthly Instalments (EMIs) which include principal and interest components. Some loans may have a moratorium period.
• Collateral and security: Financial institutions require collateral such as property, equipment, vehicles, fixed deposits, etc. Additional guarantees may be needed.
• Penal interest: Penalties in the form of a higher interest rate are charged for defaults or delayed payments.
• Foreclosure: Many term loans allow foreclosure or prepayment. However, loan providers may charge a fee for foreclosure within a specific period.
• Insurance: Some loan providers make it mandatory to take loan-related insurance covers.